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New Tax Law Will Mean More Planning Is Necessary, Not Less

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JUNE 18, 2001 VOLUME 8, NUMBER 51

Last week Elder Law Issues predicted that the principal effect of the federal government’s estate tax repeal would be to make most people revisit their estate plans (and their attorney) more often. Because of the automatic “sunset” of the repeal measure in 2011, any plan addressing the changes in estate taxes must also deal with the real possibility that the tax will be reinstated in ten years. Even if the repeal becomes fully effective the imposition of a system of “carry-over basis” will mean that wealthy individuals still need to plan for taxes imposed on their heirs.

Not surprisingly, the new tax law is considerably more complicated than even those changes. A number of other provisions affect individual estate plans, and not all of those have been widely discussed or explained. Among the other changes in the new tax law:

The generation-skipping tax (usually referred to as the GST) will be reduced and, ultimately, eliminated. Current law imposes an additional tax on some property left to grandchildren and other younger beneficiaries. There is an exemption as to the first $1,060,000 left to later generations: that exemption will begin to increase with the estate tax exemption itself in 2004. Until that time the current maximum (adjusted annually for inflation) applies.
Current estate tax law allows some owner of family businesses to pass a larger amount to their heirs without incurring estate taxes. Although it can be difficult to qualify for the favorable treatment, at least some small business owners can take advantage of the so-called QFOBI (“Qualified Family Owned Business Interests”) rules to pass a total of up to $1.35 million without estate taxes. That special deduction for family business owners will end after 2003.
Limits on contributions to retirement accounts will increase in steps beginning in 2002. Not everyone can pay in to IRA and 401(k) plans. Those who can will find that maximum IRA contributions increase to $3,000 in 2002, to $4,000 in 2005 and to $5,000 in 2008. 401(k) limits (now set at $10,500) increase to $11,000 in 2002 and by an additional $1,000 each year until 2006 (when the limit will have reached $15,000). Contribution limits are raised for other, less-common retirement plans as well.
Gift taxes are not scheduled for repeal. Although the current transfer tax system treats lifetime gifts and transfers at death in a unified approach, that relationship diminishes next year and ends in 2010. After 2002, gifts of more than $1 million will be subject to the gift tax even though there might not be any estate tax if the property had been held until the owner’s death.

What do all the estate, gift and income tax changes mean? Most people will need to reconsider their current estate plan now, and at least once again as the 2011 deadline draws near.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.